Correlation Between Interpublic Group and Omnicom

Can any of the company-specific risk be diversified away by investing in both Interpublic Group and Omnicom at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Interpublic Group and Omnicom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Interpublic Group of and Omnicom Group, you can compare the effects of market volatilities on Interpublic Group and Omnicom and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Interpublic Group with a short position of Omnicom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Interpublic Group and Omnicom.

Diversification Opportunities for Interpublic Group and Omnicom

0.95

Correlation Coefficient

Interpublic Group  Omnicom

Almost no diversification

The 3 months correlation between Interpublic and Omnicom is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Interpublic Group of and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and Interpublic Group is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Interpublic Group of are associated (or correlated) with Omnicom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omnicom Group has no effect on the direction of Interpublic Group i.e., Interpublic Group and Omnicom go up and down completely randomly.

Pair Corralation between Interpublic Group and Omnicom

Considering the 90-day investment horizon Interpublic Group of is expected to generate 1.09 times more return on investment than Omnicom. However, Interpublic Group is 1.09 times more volatile than Omnicom Group. It trades about -0.04 of its potential returns per unit of risk. Omnicom Group is currently generating about -0.07 per unit of risk. If you would invest  2,746  in Interpublic Group of on December 30, 2024 and sell it today you would lose (117.00) from holding Interpublic Group of or give up 4.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Interpublic Group of  vs.  Omnicom Group

Interpublic Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Interpublic Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Interpublic Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Omnicom Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Omnicom Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Omnicom is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Interpublic Group and Omnicom

The main advantage of trading using opposite Interpublic Group and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interpublic Group position performs unexpectedly, Omnicom can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Omnicom will offset losses from the drop in Omnicom's long position.

The idea behind Interpublic Group of and Omnicom Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.